United States Court of Appeals for the Ninth Circuit
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FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT BELLA PEREZ; ENRIQUE PEREZ, No. 18-16584 Plaintiffs-Appellants, D.C. No. v. 2:17-cv-01790- TLN-EFB MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; U.S. BANK, N.A., as trustee for the Lehman XS Trust 2006-14N Mortgage Pass-Through Certificates, Series 2006-14N, Defendants-Appellees. Appeal from the United States District Court for the Eastern District of California Troy L. Nunley, District Judge, Presiding BELLA PEREZ; ENRIQUE PEREZ, No. 18-17230 Plaintiffs-Appellants, D.C. No. v. 3:17-cv-04880- JD MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; THE BANK OF NEW YORK MELLON, OPINION Defendants-Appellees. 2 PEREZ V. MERS Appeal from the United States District Court for the Northern District of California James Donato, District Judge, Presiding Submitted February 13, 2020* San Francisco, California Filed May 11, 2020 Before: Ronald M. Gould and Mary H. Murguia, Circuit Judges, and Gary Feinerman,** District Judge. Opinion by Judge Gould SUMMARY*** California Law / Foreclosure The panel affirmed the district court’s dismissals for failure to state claims of two actions brought by plaintiff homeowners against the Mortgage Electronic Registration Systems, Inc. and banks, challenging the banks’ authority to foreclose on their properties. * The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). ** The Honorable Gary Feinerman, United States District Judge for the Northern District of Illinois, sitting by designation. *** This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. PEREZ V. MERS 3 Plaintiffs owned properties in Sacramento and San Pablo, and neither of the properties were ultimately foreclosed. Plaintiffs sought declaratory relief and cancellation of instruments as to the banks and MERS, and quiet title as to only the banks. The panel held that California law does not permit borrowers to bring judicial actions to challenge a foreclosing party’s authority to foreclose on the borrower’s property before a foreclosure has taken place. Because the California Supreme Court had not yet addressed the question of whether preemptive, pre-foreclosure actions were viable under California law, the panel looked to the relevant decisions of the California intermediate appellate courts. The panel held that plaintiffs did not state any valid claims under California law, and affirmed the district court’s dismissal of plaintiffs’ complaints. The panel held that the district court did not abuse its discretion by denying plaintiffs leave to amend because the proposed amendments would not have changed the determination that the action was impermissible under California law. COUNSEL Mark W. Lapham, Law Offices of Mark W. Lapham, Danville, California, for Plaintiffs-Appellants. Jan T. Chilton, Severson & Werson, San Francisco, California; Kerry W. Franich, Severson & Werson, Irvine, California; Ian A. Rambarran, Betsy S. Kimball, and 4 PEREZ V. MERS Lindsey N. Casillas, Klinedinst PC, Sacramento, California; for Defendants-Appellees. OPINION GOULD, Circuit Judge: These cases, in which we apply California law because of our diversity jurisdiction, present the question of whether California law permits borrowers to bring judicial actions to challenge a foreclosing party’s authority to foreclose on the borrower’s property before a foreclosure has taken place. Plaintiffs-Appellants Bella and Enrique Perez (“Appellants”) filed two such pre-foreclosure actions here. In both actions, Appellants sued Mortgage Electronic Registration Systems, Inc.1 (“MERS”) and the banks holding their two mortgages—U.S. Bank, National Association (“U.S. Bank”) in No. 18-16584, and Bank of New York Mellon in No. 18-17230. Appellants brought these actions to challenge the banks’ authority to foreclose on their properties. The district courts dismissed the complaints for failure to state plausible claims for relief under California law. We have jurisdiction under 28 U.S.C. § 1291, and we affirm. I. Appellants own two California properties that are at issue in these appeals: a West Sacramento property (Perez v. 1 MERS is a subscription-based service that tracks changes in mortgage servicing rights and beneficial ownership interests in loans secured by residential properties. PEREZ V. MERS 5 MERS & U.S. Bank, N.A., No. 18-16584 [“Perez I”]) and a San Pablo property (Perez v. MERS & Bank of New York Mellon, No. 18-17230 [“Perez II”]). A. In Perez I, Appellants executed a deed of trust in 2006 to secure a note for $399,000 on their property in West Sacramento. The deed of trust identified Dollar Mortgage Corporation (“Dollar”) as the lender and Defendant- Appellee MERS as the beneficiary for Dollar and Dollar’s “successors and assigns.” The mortgage loan was sold four times between 2005 and 2006; Defendant-Appellee U.S. Bank has owned the loan since 2006. In 2009, a notice of default and a notice of trustee’s sale were issued against Appellants for failure to make payments on their loan. A sale was scheduled, but it did not take place, and the complaint did not allege any subsequent actions taken to foreclose on the property. After briefing concluded during the motion to dismiss stage, Appellants filed a case notification to inform the district court they had received a new notice of default less than a month after filing their original complaint. There are no allegations that this notice of default resulted in a foreclosure or that any further action was taken to foreclose on the property. B. In Perez II, Appellants executed a deed of trust in 2006 to secure a note for $440,000 on their property in San Pablo. The deed of trust identified American Mortgage Express Corporation (“American Mortgage Express”) as the original lender and Defendant-Appellee MERS as the beneficiary for 6 PEREZ V. MERS American Mortgage Express and American Mortgage Express’s “successors and assigns.” The loan was sold three times; Defendant-Appellee Bank of New York Mellon currently owns the loan. There are no allegations that any foreclosure proceedings have been initiated against Appellants relating to this property. The record indicates that Appellants are consistently making their mortgage payments and are not in default. C. Appellants filed the underlying actions against MERS and the banks in California state court. Both actions were removed to federal court based on diversity jurisdiction. In each action, Appellants filed claims seeking declaratory relief and cancellation of instruments as to the banks and MERS, and quiet title as to only the banks. They sought declarations that the banks had no legal rights in the underlying notes or deeds of trust, and that the banks did not have authority to collect mortgage payments or to initiate foreclosure proceedings. Appellants sought unencumbered titles to their properties and permanent injunctions to prevent the banks from collecting mortgage payments or foreclosing on the properties. Appellants base their claims for relief on alleged defects in the assignments of the underlying deeds of trust, such that, Appellants contend, the banks never received any beneficial interest in the loans. The district PEREZ V. MERS 7 courts dismissed the complaints for failure to state plausible claims for relief under California law.2 II. Appellants seek reversal of the district courts’ dismissals of their complaints. We review a district court’s dismissal of a complaint de novo. Yagman v. Garcetti, 852 F.3d 859, 863 (9th Cir. 2017). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). We apply California law to these removed diversity actions. Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001). A. Appellants’ claims are premised on the theory that they can preemptively challenge the banks’ authority to foreclose on their properties by filing judicial actions before any nonjudicial foreclosure has taken place. The controlling question before us is whether such preemptive, pre- foreclosure actions are viable under California law. When interpreting California law, we are bound by the decisions of the California Supreme Court, the state’s highest court. Vestar, 249 F.3d at 960. If there are no such decisions, and “where there is no convincing evidence that 2 In Perez II, the district court dismissed the original complaint with leave to amend. The district court then dismissed the amended complaint without leave to amend because the amended complaint failed to add “any new or different operative facts.” 8 PEREZ V. MERS the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state’s intermediate appellate courts.” Id. (quoting Lewis v. Tel. Emps. Credit Union, 87 F.3d 1537, 1545 (9th Cir. 1996)). The California Supreme Court has not directly answered the question of whether preemptive, pre-foreclosure actions are viable under California law.3 In Yvanova v. New Century Mortg. Corp., 365 P.3d 845, 858–59 (Cal. 2016), the California Supreme Court held that, in an action for wrongful foreclosure, borrowers have standing to challenge prior assignments of the note if they allege the assignment was void, as compared to voidable. The California Supreme Court expressly limited its holding to post-foreclosure actions for wrongful foreclosure, explaining that the holding did not apply to borrowers who “attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party’s right to proceed,” id. at 848, or to borrowers who bring “action[s] for injunctive or declaratory 3 Before deciding Yvanova, the California Supreme Court granted review of a pre-foreclosure action in Keshtgar v.